What is happening to remittances in Nepal?

Sept. 26, 2016

The tide of money transfer to Nepal has changed in recent times, with potentially alarming consequences.

Nepal is a textbook example of a country
that benefits from remittances. The
Kathmandu Post has summarised well why this is the case:

“If there is one consistent narrative about
Nepal over the last two decades, it must be about migration and remittances.
Political and development activities in the country have always remained
volatile. While political culture is punctured by intra- and inter-party
fighting and external interference, economic development is beset by stalled
projects and… eroding bureaucratic capacity. However, migration and remittances
have been notably resilient to internal and external shocks, providing crucial
support to the economy characterised by high unemployment and slow economic
growth”.

In short, the money sent home by migrant
Nepalis props up an economy that is not self-sufficient for the time being. Around
30% of Nepali GDP comes in the form of remittance, sent by thousands of
workers who travel to (predominantly) Malaysia and the Middle East,
specifically to work. As construction has boomed in Qatar, Saudi Arabia, and
other places, so has the demand for migrant workers risen.

But what happens to a country so crucially
dependent on remittance, when global demand for oil and commodities suddenly
evaporates? Recently plummeting oil prices have cooled the pace of
construction, and the Malaysian government even briefly implemented a ban on
foreign workers (which
has since been lifted, but with restrictions). All of this adds up to a
decline of opportunities for Nepalis looking for work abroad. And if they
aren’t earning, they aren’t remitting.

So while many talk about the multiples by
which remittances exceed foreign direct investment, we have to question whether
this resource is being used well. For the moment in Nepal, it appears not well
enough.